What is the solution to balancing the salary cap with no tax states?

[Monsieur Miz]

Apparently big markets can offer big endorsement deals and celebrity status so I don’t see what the big problem is.

We have Arber Xhekaj and Raphael Harvey-Pinard in ads so yeah...

 

[NVious]

The NHL doesn't think of this as a problem so there will be no solution.

The reality is the Canadian market is capped, 95-98-99% as in you're not drawing in new fans.

Southern American markets can be massively expanded in terms of fans, so the NHL will do whatever it takes to have those markets winning.

 

[JaegerDice]

The NHL doesn't think of this as a problem so there will be no solution.

The reality is the Canadian market is capped, 95-98-99% as in you're not drawing in new fans.

Southern American markets can be massively expanded in terms of fans, so the NHL will do whatever it takes to have those markets winning.

The Canadian market is not capped for new fans. The Canadian hockey audience is overwhelmingly white, male, and old.

There are plenty of new fans to find, if they care to.

 

[NVious]

The Canadian market is not capped for new fans. The Canadian hockey audience is overwhelmingly white, male, and old.

There are plenty of new fans to find, if they care to.

As opposed to marketing to those sorts of fans down south of which there are far more?

 

[LaffyTaffy13]

So the super rich pay no tax and the working man pays for everyone else ? This is what America voted for in November so why not the NHL..

Your local pro teams with 100 total athletes that the constituents root for not paying state and city tax wont even be a rounding error.

The top 10% also paying almost all net taxes. The bottom 50% are burdens on society as they pay less in taxes then they receive public services. But thats OT.

 

[JaegerDice]

As opposed to marketing to those sorts of fans down south of which there are far more?

It's easier to market to Canadian fans simply because of how ubiquitous hockey is. It's at the top of every sports show, hockey players are in ads everywhere, hockey being played at schools and after-school programs (be it ice, floor or roller) is taken as a given.

Yes, there are more people in the US that have not made up their mind one way or another about hockey, but the infrastructure to actually market and inundate them with hockey isn't there. Each new fan is way more expensive to earn than any non-targeted fans in Canada.

Hockey just has to try and be less old, out of touch, sexist and racist, and they'd have a really easy time boosting their money from Canadian markets. Easier said than done given the calcified hockey culture but still worth exploring.

 

[Jumptheshark]

We can go around and around and at the end of the day there is none.

 

[cowboy82nd]

1.) people noticing something does not mean it wasn’t an issue before or is not an issue

2.) again. This came on the heels of the league (correctly) getting rid of cheater contracts. Stamkos not signing with the leafs didn’t change that he signed for less than “market” value in any high tax market.
He probably would have just signed for 12 years in LA or something.

Plenty of top ufas haven’t signed in Toronto over the years. Including. Gretzky.

Toronto didn't want Gretzky. It was in one of his books. The GM at the time wanted Gretzky (when he was a UFA) and the management team (or owner {can't remember which}) asked if they would sell more tickets if Gretzky was wearing a Toronto sweater. The GM said no, we already sell out every game and then the owner said, then why do we need Gretzky?

 

[joestevens29]

I have no idea what an actual solution would look like. There are so many loopholes around everything

How do you take into account that every big contract Florida does have includes a NMC. What kind value do you add to that as generally those are clauses that lower cap hits as well.

How do you account for teams that are able to sign players for cheaper as they are a contender compared to a bottom feeder?

How do you account for a GM that was able to pull of a trade to get retained players, but gave up premium assets to acquire them.

How about the teams that pay way more for their management team, coaching team and scouting team, and have that edge over clubs that can't afford to keep up with the larger markets?

 

[Osakahaus]

Get rid of the salary cap, add a luxury tax and make it reasonable to spend money.

 

[Frank Drebin]

The Canadian market is not capped for new fans. The Canadian hockey audience is overwhelmingly white, male, and old.

There are plenty of new fans to find, if they care to.

juice isn't worth the squeeze.

 

[covfefe]

This is the biggest misconception in the league and it needs to disappear. The best tax state (SEA) relative to the worst tax state/province (MTL) results in a 6.4% difference in taxes paid. I did the math based on each teams schedule.

Why? Because you pay tax in the jurisdiction you are playing in so 41 games for Montreal are taxed at a lower rate and 41 games for Seattle are taxed at a higher rate, which closes the gap.

Now (for the Canada argument), imagine you are a pro athlete living in Canada and earning in USD. Your USD go so much further in Canada than they do in the US it quite easily offsets the 6.4% difference. A cocktail at a nice restaurant in a big US city exceeds $25 these days, that's $35 Canadian, for a drink... A burger and a beer in a big US city is $40.00 which is $55.00 Canadian. This is saying nothing about real estate, luxury cars and the likes, all more expensive in most big US cities.

Add to this that in Ontario (for one) there are tax incentives for athletes (RCA's) that help to level the playing field. Those that want to manage their salaries intelligently can quite easily offset the 6.4%.

So yeah, it's a non issue. Any pro athlete (or agent) that boils it down to taxes is being shockingly narrow minded, which I suppose shouldn't surprise anyone.

I have set up and administered the ongoing function of RCA's for 100's of players and corporate clients. And I can assure you that tax considerations are very much an ongoing issue re: player flows and FA decisions. Beyond that they are generally a limiting factor in, for example, retaining buy side talent who have opportunities south of the border - which is the exact dynamic up for debate here. I have lost many clients to firms in Florida and TX over the past several years because there is simply no comparison b/w their Q/CoL advantages, even when you factor in excessive insurance, prop tax, etc.

The primary issue is that an RCA does not allow you to reap the up front benefits of your enormous cash flow. I can count on one hand the # of clients I've met who were thrilled with the idea that they will have to repatriate assets & sock away cash for 15+ years in order to level set their tax bills. It takes a big picture thinker to understand this and, frankly, most hockey players aren't that.

My experience is that players in their mid 30s who have stacked 50+ are always happy to move forward with creative solutions like this. Below that age, you have more meetings, diligence, questions from lawyers, wives, etc. You also have considerable career risk given the nature of hockey. Past that you also have to pay our firm, and with most young guns clocking sub-$20m CE, the juice is simply too much to justify the ongoing admin / costs to carry.

There are so many problems with RCA's and the assumption that they fully level set tax treatments is misinformed. Alan Walsh did a good job of pitching them some years ago, but he also conveniently left out the downside case(s).

Happy to elaborate, or not, from here.

 

[Cool Hand Puke]

Get rid of the salary cap, add a luxury tax and make it reasonable to spend money.

Only way the leafs win the cup is to buy it like the Dodgers

 

[Menzinger]

Interestingly for a while a lot of the low tax, warm weather NHL markets were horribly managed, so the hard cap advantages they could tap into were unrealized.

Now the Florida teams, Canes, Stars ect are now incredibly well managed and now are able to take advantage of structural imbalances of the league rules to their fullest effect. And that advantage is going to grow over time.

I used to be just fine with the cap. But the longer this goes on, the problems are just harder to ignore. It really ties a weight to markets in less desirable locals.

I don't see any practical solutions though while also keeping the hard cap. Unless say they allowed every team to have a franchise player become exempt from the cap, allowing them to spend a bit more if willing. Adjusting for taxes is too complicated

 

[Stephen]

The NHL doesn't think of this as a problem so there will be no solution.

The reality is the Canadian market is capped, 95-98-99% as in you're not drawing in new fans.

Southern American markets can be massively expanded in terms of fans, so the NHL will do whatever it takes to have those markets winning.

I think this is where the NHL (and you) have it wrong. Maybe your season ticket base across 7 existing teams is capped but there’s no cap on incentivizing existing and new fans from spending money on the NHL and that includes existing markets. It’s not like you’re already a fan and your spending dollars are capped.

Also, it’s un-PC to say this. But think about the prestige of a league relative to the prestige of its major teams winning. All things equal, does MLB like it better if the LA Dodgers are winning the World Series. Or do they want to prop up Oakland (RIP) so they survive as a franchise? Do the LA Lakers do more for the NBA when they win, or does the league need to grow the game in New Orleans and Charlotte and Toronto? I’m sure they’re not opposed to growth but I don’t think they’re tripping over themselves for the success of those markets? All is to say most pro leagues aren’t in the business the same as the NHL when they talk about growing the game.

 

[Bounces R Way]

Every time I see this topic on these boards it's always the same myopic concrete black or white arguments.

"Taxes are the reason these no state tax teams are competitive! They get first dibs on all the best FAs and get their high end talent signed for less than the rest of us!"
-obvious bullshit, takes a lot more than a simple and relatively small salary cap advantage to build a winner in the NHL. Many many things you need to get right. Definitely an element of crying unfair here and well guess what, no such thing as a level playing field in pro sports. Some markets will always have advantages compared to other ones. Tough titties.

"Taxes have absolutely no impact on a team's competitive edge, everyone who even mentions them are simply whining because their teams aren't well managed! All you idiot fans just don't understand accounting."
-also obvious bullshit, there just simply is an advantage to having your team located in one of these markets. Agents know it and so do the players. Do you think Kucherov is at that cap hit he makes if he played in Toronto or New York or LA? No it doesn't mean that all Tampa, Vegas, and Florida's cups come with an asterisk or something stupid like that but you can't just handwave away legitimate concerns as 'whining'.

sick of work today so put together this data from the last 5 years quickly

Clearly there is a slight but marked advantage. How much of one and whether it actually constitutes a problem that needs solving are other questions. I'm aware the cap doesn't exist to guarantee a level of parity, you're never going to get an even playing field. Markets aren't and never will be all equal and to me this advantage doesn't really look all that different than the cache of playing for an O6 team or nice weather or more anonymity or contender status or whatever it is. Just another fact of life to accept.

 

[tarheelhockey]

Ny state collects around $118,000,000,000 a year in income taxes. If we say NY has around $1,000,000,000 in professional athlete salaries taxes at 10% that is a loss of tax revenue of $100,000,000. In otherwords .5% of the states total tax revenue. This is without even considering the potential economic impact and increased tax receipts that better teams produce by leading to more attendance at games, more tix sold, more games, the businesses and public transit around the areas/stadiums benefitting bringing in revenue which would be taxes. Etc.

You’re actually advocating to pull $100 million out of public services, in order to enable a local billionaire cartel of billionaires to hire one or two more millionaires to fluff the profit line for their company?

Dystopian.


and no, there will be no additional “economic impact” from a team that already sells out at exorbitant prices. This would be a near-total loss to the public, in addition to being hideously unethical on its face.

 

[PlayersLtd]

I have set up and administered the ongoing function of RCA's for 100's of players and corporate clients. And I can assure you that tax considerations are very much an ongoing issue re: player flows and FA decisions. Beyond that they are generally a limiting factor in, for example, retaining buy side talent who have opportunities south of the border - which is the exact dynamic up for debate here. I have lost many clients to firms in Florida and TX over the past several years because there is simply no comparison b/w their Q/CoL advantages, even when you factor in excessive insurance, prop tax, etc.

The primary issue is that an RCA does not allow you to reap the up front benefits of your enormous cash flow. I can count on one hand the # of clients I've met who were thrilled with the idea that they will have to repatriate assets & sock away cash for 15+ years in order to level set their tax bills. It takes a big picture thinker to understand this and, frankly, most hockey players aren't that.

My experience is that players in their mid 30s who have stacked 50+ are always happy to move forward with creative solutions like this. Below that age, you have more meetings, diligence, questions from lawyers, wives, etc. You also have considerable career risk given the nature of hockey. Past that you also have to pay our firm, and with most young guns clocking sub-$20m CE, the juice is simply too much to justify the ongoing admin / costs to carry.

There are so many problems with RCA's and the assumption that they fully level set tax treatments is misinformed. Alan Walsh did a good job of pitching them some years ago, but he also conveniently left out the downside case(s).

Happy to elaborate, or not, from here.

Wasn't trying to suggest they completely offset the tax burden, only used it as an example of a tool that begins to do so. But fair point that most young athletes are not going to have the long term focus to take advantage.

So you say that tax considerations are very much an ongoing issue but how do you explain that when we are talking about roughly 5% (in the case of Ontario vs Florida)?

I know a key role an accountant serves is to limit their client's tax burden and I know accountants will rightfully magnify the hundreds of thousands of dollars that that 5% represents, and into the millions when invested. But how do other factors such as the weak Canadian dollar and the high cost of living in the US not begin to eat away at the 5% advantage (or 6.4% as a worst case as I first stated)?

I'm to assume that it's simply outside of your purview to go into that kind of detail or that it is simply not guaranteed because exchange rates will fluctuate and an athlete can decide to live as cheap in the US as they do in Canada. I'll assume that agents also gloss over the things that bite into the 6.4% for the same reasons, tangible savings in the form of lower taxes are a lot easier for a mid twenties athlete to digest than a cost of living analysis and a bunch of hypotheticals on lifestyle.

The point remains however that we are talking about a worst case scenario of 6.4%. I just can't see a rational forward thinking person making that the driving force behind their decision making the way the media makes it out to be.

*Signing bonuses paid up front and thus not subject to away game tax rates notwithstanding.

 

[ijuka]

The other states just need to lower their taxes. It's a simple solution that makes everyone happy.

When there's a tax on every interaction where money exchanges hands, as is typical, then down the line we end up in a situation where 10 dollars has generated 500 dollars of taxes. The system is an absurd infinite money glitch.

 

[Summer Rose]

The other states just need to lower their taxes. It's a simple solution that makes everyone happy.

When there's a tax on every interaction where money exchanges hands, as is typical, then down the line we end up in a situation where 10 dollars has generated 500 dollars of taxes. The system is an absurd infinite money glitch.

If everyone just typed "player.additem f 50000" once per day we'd be good.

 

[Kaners PPGs]

1.) The rangers gave Richard’s the biggest contract in NHL history by AAV right?
It’s not that they don’t sign players. 20% of the league can sign in no state tax markets they signed for less if NYR is so popular why do they not get discounts? If NYR is so popular why why do Panarin and Igor sign for 14%. If there are so many other factors. Why does it always end up that high tax teams sign star (not superstars like mcdavid) for 13.5-14.5% of the cap. And stars in no state tax markets always sign for 11-12?

Why is it so consistent?

2.) guentzel signed for 9 million. 10% of the salary cap. He could have signed other places. Literally all of the top ufas last year signed in no state tax markets that’s probably not going to be the case this year. There are only so many spots but it’s a heck of a trend

3.) you saying those contracts were “widely panned” does not make it true.

4.) of course plenty of players want to play on winning teams. They did in 2014 too. Kane/toews/kopitar/doughty/karlson/price/tavares etc. all wanted to as well. Why did they all take 14% aav?

Find a single star player at any time who signed in their prime for 14% aav in a no state tax market. Just one.
There aren’t any.

find a star ufa who signed in a high tax market for 11% in their ufa years.

There aren’t any.

Why?

Exactly! I don't care about all the other explanations and excuses. Look at how much players sign for. How many times do we need to see players sign for under their market value when they play in the tax-free state versus players signing at market value or higher in heavily taxed markets before some of these stuborn people admit that the taxes absolutely makes a difference?

When Bennett signs for 8 years at 7.5 M this offseason instead of 9.5 M in Toronto, everyone will point to the weather and not wanting to play in Toronto's fishbowl as the reason he signed for so much less to stay in Florida. The reality is the take home money will be close to the same AND he doesn't have to put up with the mess that is Toronto's market. Then Florida gets to put that extra 2 M towards signing a depth piece like an Evan Rodrigues. It is clearly an advantage whether people want to recognize it or not.

 

[PhysicalGraffiti]

Exactly! I don't care about all the other explanations and excuses. Look at how much players sign for. How many times do we need to see players sign for under their market value when they play in the tax-free state versus players signing at market value or higher in heavily taxed markets before some of these stuborn people admit that the taxes absolutely makes a difference?

When Bennett signs for 8 years at 7.5 M this offseason instead of 9.5 M in Toronto, everyone will point to the weather and not wanting to play in Toronto's fishbowl as the reason he signed for so much less to stay in Florida. The reality is the take home money will be close to the same AND he doesn't have to put up with the mess that is Toronto's market. Then Florida gets to put that extra 2 M towards signing a depth piece like an Evan Rodrigues. It is clearly an advantage whether people want to recognize it or not.

It's not, it's a fact of life and the Panthers are coming off back to back Cup appearances with a win.

If Toronto had done that he may have gone there.

As has been mentioned ad nauseam, Florida isn't the only state, and the only "advantage" is in regard to state income tax. At most in the US, this is 13 percent. That's hardly going to move the needle for a player who wants a Cup. Not sure what the equivalent is in Canada to state in come tax, but if it's a 2 million a year difference, that's really not enough to dissuade most players from chasing a Cup.

Have a winning team with a good culture, and you'll sign players. This tax excuse is really pathetic. It's people in your position that are searching for excuses and explanations.

I guess if I was a fan of certain teams, I'd look for wild reasons my team can't win or compete, to go far as to analyze state income tax. It's just an outlandish excuse and to think the league needs to do something is even more ludicrous.

This entire thread and argument hurts my head.

 

[cowboy82nd]

Get rid of the salary cap, add a luxury tax and make it reasonable to spend money.

That would NEVER make it past the owners. They are the ones that wanted a salary cap for cost control.

 

[Summer Rose]

That would NEVER make it past the owners. They are the ones that wanted a salary cap for cost control.

That's what we have to remember about why the salary cap exists and why the owners wanted it: cost control.

The parity it produces is just a natural side effect. While nice in its own right, that was never the intention.

 

[LaffyTaffy13]

You’re actually advocating to pull $100 million out of public services, in order to enable a local billionaire cartel of billionaires to hire one or two more millionaires to fluff the profit line for their company?

Dystopian.


and no, there will be no additional “economic impact” from a team that already sells out at exorbitant prices. This would be a near-total loss to the public, in addition to being hideously unethical on its face.

Nope. To make the teams more competitive which will be popular amongst constituents and lead to additional tax revenue generated as with more games comes more rev for surrounding business, the arena, wages, all of which are taxed